DTE Energy Company

Hello, and thank you for standing by. My name is Bella, and I will be your conference operator today. At this time, I would like to welcome everyone to DTE Energy Q3 2025 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. To withdraw your question, press star 1 again. I would now like to turn the conference over to Matt Kopinski, Director of Investor Relations. You may.

Thank you and good morning, everyone. Before we get started, I'd like to remind you to read the Safe Harbor Statement on page 2 of the presentation, including the reference to forward-looking statements. Our presentation also includes references to operating earnings, which is a non-GAAP financial measure. please refer to the reconciliation of gap earnings to operating earnings provided in the appendix. With us this morning are Joy Harris, President and CEO, and Dave Rude, CFO. And now I'll turn it over to Joy to start our call this morning.

Thanks, Matt. Good morning, everyone, and thank you for joining us. While this is my first time leading our earnings call as CEO, I've had the privilege of engaging with many of you over the past couple of years and appreciate the dialogues. I'm off to a running start and continuing to build on the strong foundation we've established. I have a number of exciting updates to share with you today, which include highlighting the progress we're making on achieving our 2025 financial goals, providing a strong 2026 operating EPS outlook, and outlining our enhanced five-year plan that now extends through 2030. A highlight of our strategy is the transformational growth we're seeing in data center demand. I am pleased to announce we finalized an agreement with a leading hyperscaler to support 1.4 gigawatts of data center load. This is an exciting milestone that I'll expand on as we walk through our updated strategic plan. Aside from the 1.4 gigawatts of new load, We are still in late stage negotiations with an additional three gigawatts of data center load, providing potential further upside to our capital plan as we advance these negotiations. As a result of this first data center transaction and continued need to modernize our utility assets, our updated plan includes significant increases in utility investments for our customers and delivers six to 8% operating EPS growth through 2030. We are confident we will reach the high end of our targeted range in each year driven by RNG tax credits and the flexibility they provide. This plan supports our continued strategic shift toward higher quality utility earnings fueled by increased demand, continues our efforts to build the grid of the future while transitioning to cleaner generation, and demonstrates our ongoing commitment to affordability for our customers. I will share additional details of our plan over the next few slides. Dave will give an overview of our third quarter results, 2025 guidance and 2026 early outlook, and then we will open it up for your questions. I'll start on slide four by saying that we are continuing to deliver strong results in 2025. and we are well positioned to hit the high end of the guidance this year. As always, our success is a testament to our dedicated and engaged team committed to serving our customers and communities. I am extremely proud that our team was recognized by the Gallup Organization for the 13th consecutive year with a Great Workplace Award And our employee engagement ranks in the 94th percentile globally among thousands of organizations. We are well positioned to achieve the high end of our 2025 operating EPS guidance range. Looking ahead to 2026, our early outlook reflects operating EPS growth of 6% to 8% over our 2025 guidance midpoints. and we are confident in our ability to deliver at the higher end of that range. Let me move to slide five to provide more details on our long-term plan. We are in an exciting time for our industry and for DTE, and we are focused on seizing the opportunity to deliver for our customers, communities, and investors. We're increasing our five-year capital investment plan by $6.5 billion compared to the prior plan, driven by the data center transaction and the continued need to modernize our utility assets. At DTE Electric, the additional investments are strategically focused to support data center low growth, advanced cleaner generation, and to enhance distribution infrastructure that will drive continued improvements in reliability. DTE Gas is focused on system reliability and infrastructure renewal, ensuring safe, efficient service for our customers while modernizing our network. CD Advantage will continue to prioritize investments in utility-like long-term fixed fee contracted projects, which aligns well with our strategy to deliver stable, predictable earnings for our investors. Our investment plan supports a further strategic shift toward higher quality utility earnings over the next five years, targeting utility operating earnings to increase to 93% of our overall earnings by 2030. Importantly, data center opportunities are helping drive this shift as we allocate additional capital to serve this load, which further supports affordability for our existing customers. We have incorporated a more conservative growth outlook for DTE Vantage, which is largely influenced by commodity pricing assumptions in our longer-term forecast. As part of our most recent strategic analysis, we evaluated a range of pathways to drive sustainable long-term value. This effort reinforced our conviction that leaning into our core utility business while taking a more conservative view at DTE Vantage will best position us to deliver value for our customers and for our investors. As you can see in the appendix of this presentation, the 2030 outlook for Vantage is flat to 2025 guidance as our solid project development pipeline offsets the expected roll-off of 45V production tax credits after 2029. We're confident this approach also positions us well for consistent future growth as we expect to continue to make progress on additional data center opportunities that will deliver upside to our base plan. Let me move to slide six to highlight updates to our capital plan at DTE Electric. Our updated capital investment plan at DTE Electric provides a $6 billion increase over the prior plan, driven by the data center transaction and customer-focused initiatives that align with our long-term strategy. A key component of this plan is new storage investment to support the increased data center load. Importantly, this incremental storage investment is fully funded by the data center customer. The plan also includes renewable investments that support the continued success of our Migraine Power Voluntary Renewables Program and fulfill the requirements of the Legislative Clean Energy Plan. And to ensure reliable baseload generation as we transition away from coal, we are planning the construction of a combined cycle gas turbine to replace our retiring coal plant. We are submitting a competitive bid for the 2026 Integrated Resource Plan All Source RFP for a new CCGT to replace Monroe Power Plant. We're also continuing to invest in distribution infrastructure to harden the grid and improve reliability for our customers. These grid investments are already delivering results, driving a nearly 90% improvement in the duration of outages since 2023 as we make strong progress toward our goal of reducing power outages by 30% and cutting outage time in half by 2029. Our current rate case filing supports these reliability investments while remaining focused on customer affordability. This filing includes a request for approximately $1 billion in distribution spending to be included in the infrastructure recovery mechanism by 2029, which was largely supported by the NPSC staff in its recent testimony. The IRM will help drive consistent, predictable investments in grid modernization to improve reliability for our customers while also simplifying future regulatory proceedings. The order for this case is expected at the end of February. Overall, I'm thrilled about the opportunities ahead for DTE Electric as we continue our efforts to improve reliability for our customers, transition to cleaner generation, and execute on economic development opportunities to drive low growth and support affordability for our customers. Let me move to slide seven to provide an update on our advancement of data center opportunities. As I mentioned, we successfully executed a significant agreement to support 1.4 gigawatts of new data center load, representing a major step forward in our utility growth strategy, while also delivering meaningful affordability benefits to our existing customers. The demand is expected to ramp up over the next two to three years, giving us a clear runway to align infrastructure development and resource planning with customer needs. While we can use existing capacity to support this ramp, we'll also need to invest in new energy storage solutions to meet the full capacity requirements. Our updated plan includes nearly $2 billion of incremental energy storage investment and additional tolling agreements to support this data center load. Given our excess capacity, we will use our existing industrial tariff for this customer and combine it with an energy storage contract to support the incremental storage investment. We are including key terms in these agreements that will protect existing customers, including a 19 year power supply contract with minimum monthly charges. The data center will fund its own storage needs through a 15 year energy storage contract. These terms are important to us and our customers as we ensure the data center revenue support the required investments to meet this new demand. We plan to submit our regulatory filing tomorrow requesting approval of the data center contract. Energy storage investments will begin ramping in 2026 to align with the projected increase in data center load. As I mentioned, we also have additional data center opportunities beyond this initial 1.4 gigawatts. We are in advanced discussions with additional hyperscalers for over 3 gigawatts of new load, and we have a pipeline of an additional 3 to 4 gigawatts behind that. We also expect longer-term growth opportunities through the expansion of these initial hyperscaler projects. The generation investments that will be needed to support these additional opportunities could very well come into the back end of our five-year plan, providing incremental capital investments above what we are laying out for you today. A key step in preparing for the development of new generation to support large data center loads is integrating these requirements into our next IRP filing, which we expect to file next year. So a lot of great opportunities ahead of us on the data center front. We will continue to provide updates along the way as things progress. Let me move to slide eight to discuss our commitment to customer affordability. We have a history of executing on our investment plan with a sharp focus on customer affordability. As you can see on the chart, our average annual bill increase over the last four years is significantly lower than the national average and Great Lakes average. We remain committed to maintaining this focus on affordability throughout our plan. We are advancing on a number of initiatives to support affordability for our customers while continuing to invest and support our key priorities. Importantly, near-term data center growth will help create substantial affordability headroom for our existing customers as we sell our excess generation. Our continuous improvement culture will ensure O&M and capital investments remain efficient. The shift from coal to natural gas and renewables also helps to further reduce O&M costs, while our diverse energy mix ensures economic fuel costs for our customers. And finally, the IRA provisions support the renewable energy investments while supporting customer affordability goals. So to wrap up my comments, I'll say I'm very excited about our long-term plan and the opportunities we have ahead of us to continue to deliver for all of our stakeholders, including excellent service to our customers and communities, and continued strong financial performance for our investors. I'm looking forward to spending more time with many of you at EEI to discuss our updated plan. With that, I'll hand it over to Dave. Over to you, Dave.

Thanks, Joy. Good morning, everyone. Let me start on slide nine to review our third quarter financial results. Operating earnings for the quarter were $468 million. This translates into $2.25 per share. You can find a detailed breakdown of EPS by segment, including our reconciliation to GAAP reported earnings in the appendix. I'll start the review at the top of the page with our utilities. DTE electric earnings were $541 million for the quarter. Earnings were $104 million higher than the third quarter of 2024. The main drivers of the variance were timing of taxes and rate implementation, partially offset by higher O&M and rate-based costs. The impact from the timing of taxes of the quarter was fairly significant at $63 million favorable relative to third quarter 2024. This is due to the timing of investment tax credits associated with when our solar projects are placed in service. This timing was known and built into our plan, and the remaining year-to-date timing favorability of $33 million relative to 2024 will reverse in the fourth quarter. Moving on to DT Gas, operating earnings were unfavorable $38 million, which is $25 million lower than the third quarter of 2024. The earnings variance was primarily driven by higher O&M and rate-based costs. With our confidence that we will hit the top end of our overall DTE operating EPS guidance range this year, we've been able to unwind one-time lean operational measures and other unsustainable reductions that were implemented over the past few years at DTE Gas to counteract warmer weather. This will likely bring this segment in below its guidance range in 2025. Let me move to DTE Vantage on the third row. Operating earnings were $41 million for the third quarter of 2025. This is an $8 million increase from 2024 driven by RNG production tax credits in 2025, partially offset by lower steel-related revenues. We remain on track for the full year guidance of DT Advantage. On the next row, you can see energy trading earned $23 million for the quarter. We continue to experience strong margins in our contracted and hedged physical power and gas portfolios. On a year-to-date basis, We are currently above the high end of operating earnings guidance for this segment. This strong performance places us in a favorable position to leverage any potential further upside across DTE to continue to provide flexibility for future years. Finally, corporate and other was unfavorable by $77 million quarter over quarter due primarily to the timing of taxes, which will reverse by year end, as well as higher interest expense. Overall, DT earned $2.25 per share in the third quarter of 2025, which positions us well to achieve the high end of our guidance range in 2025. Let's move on to slide 10 to discuss our 2026 outlook. As Joy mentioned, we are well positioned to deliver another strong year in 2026. Our 2026 early outlook range, $7.59 per share to $7.73 per share, which provides 6% to 8% growth over our 2025 guidance midpoint. We are confident that we will deliver at the high end of the guidance range through the flexibility that the 45Z tax credits provide. Utility growth will be driven by customer-focused investments, including distribution and cleaner generation investments at DT Electric and main renewal and other infrastructure improvements at DT Gas. DT Advantage will see growth from the development of new custom energy solutions projects and continued contributions from R&G production tax credits. And at Energy Trading, we continue to see strength in both our structured physical power and physical gas portfolios, giving us confidence in our targets as we head into 2026. We will share additional details on 2026 during our fourth quarter call following the close of a strong 2025. Let's turn to slide 11, discuss our balance sheet and equity issuance plan. We continue to focus on maintaining solid balance sheet metrics. To support the significant increase to our capital investment plan that we need to execute for our customers, we've increased our planned equity issuances. We're targeting annual issuances of $500 million to $600 million in 2026 through 2028. This level of equity supports the capital but is now coming earlier in this plan relative to our prior plan. The increased equity will help fund the increase in our capital plan, including the storage investments related to our data center agreement, while ensuring that we maintain a strong balance sheet. We will continue to maximize the use of internal mechanisms to issue equity, but will also incorporate manageable external issuances. Our five-year plan fully incorporates the equity needs and continues to deliver 6 to 8 percent operating EPS growth with a bias toward the upper end each year through 2030. Our long-term plan also includes debt refinancing and new debt issuances. We expect to strategically utilize hybrid securities to support our financing plan, and we will continue to manage future debt issuances through interest rate hedging and other opportunities. Importantly, we continue to focus on maintaining our strong investment-grade credit rating and solid balance sheet metrics as we target an FFO to debt ratio of approximately 15 percent. This plan ensures that DTE continues to be well positioned to make the necessary investments for our customers while delivering the premium total shareholder returns that our investors have come to expect over the past decade with strong utility growth and a dividend growing with operating EPS. Let me wrap up on slide 12, and then we will open the line for questions. Our team continues our commitment to deliver for all of our stakeholders. We are delivering solid results in 2025. We are on track to achieve the high end of our operating EPS guidance range, and we are confident we will achieve the high end of our 2026 early outlook, again, due to the flexibility that the 45Z tax credits provide. Our updated five-year plan provides high-quality, long-term 6 to 8 percent EPS growth through increased customer-focused utility investment, which increases our utility operating earnings to 93 percent of our overall earnings by 2030. This plan increases our five-year capital investment by $6.5 billion over the previous plan, supported by the data center transaction and the continued need to modernize our utility assets. Additional data center opportunities provide potential upside to this five-year capital investment and EPS growth plan. We continue to target six to eight percent long-term operating EPS growth, with 2026 operating EPS midpoint as the base for this growth. We are confident that we will reach the high end of our target range in each year, driven by RNG tax credits and the flexibility they provide. And we continue to target a strong dividend that grows with operating EPS. Overall, we are well positioned to deliver the premium total shareholder returns that our investors have come to expect with a strong balance sheet that supports our capital investment plan. With that, I thank you for joining us today and look forward to seeing many of you at EEI. We can open the line for questions.

At this time, I would like to remind everyone in order to ask a question, press star then the number one on your telephone keypad. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Shar Pariza with Wells Fargo. Your line is now open. Please go ahead.

Hey, guys. Good morning. Hey. Can you hear me? Morning, morning. So obviously the upside slide, it seems fairly material around incremental data center opportunities. Are the data center deals kind of, are they an inflection point to rebase higher shift that six to eight CAGR or should we still kind of assume lengthen and strengthen? I guess, what do you need to see the revisit that got a trajectory trajectory, especially since some of it can hit the back end of the plan and you're already growing at the higher end. Thanks.

Hey, Char, and good morning. Good morning. Thank you for the question. Yeah, we're really excited about the first 1.4 gigawatt deal we have on the table, and we'll feel well positioned to execute on that. We're continuing conversations, as I mentioned in the intro. We've got four gigawatts, well, three to four gigawatts that we're continuing to work with hyperscalers with a total pipeline of roughly seven. That said, as we are advancing these negotiations, Our intent would be to find terms that we can then, and the ramp that we can then incorporate into our next year's IRP, and then determine the generating resource to support that load. It could be a large generating load or a combination of batteries and renewables, but the intent would be to get it into the five-year plan if at all possible. And that would give us growth opportunities above and beyond where we are today. So we feel really good about the deal we have on the table and our ability to execute on it.

Okay. Got it. But just, I guess, just to, is it a creative to the six to eight, I guess, how do we sort of think about how you currently guide?

Yeah, I think that, I think that is a fair assumption that it would be upside to our current six to eight.

Perfect. Thank you. And then just, And obviously, you noted a more conservative outlook for Vantage due to commodity pricing. But I guess, what are you seeing on the energy service side? And does it make sense to monetize certain assets, especially with the inflection of equity needs starting in 26?

Yeah, we're continuing our focus on our energy service business line and Vantage business We're working on a behind-the-meter project, in fact, outside of the state of Michigan for our data center, and that could be an additional vertical that we pursue. But, you know, Vantage has been a really great part of our portfolio for over 20 years with a really strong BD pipeline and opportunities for really good returns. But, as always, we look for ways to optimize value for shareholders. We don't have anything eminent right now, but it's something that we'll continue to examine.

Got it. Perfect. And a big congrats, Julia, on your first earnings call. I know Jerry's listening. He's proud. And just keep that dividend growing for him now that he's on a fixed income. Appreciate it, guys.

Thanks, sir. Thanks for that. And your next question comes from the line of Jeremy Tonet with J.P. Morgan. Please go ahead.

Hey guys, good morning. This is actually Aiden Kelly on for Jeremy.

Hey Aiden.

Yeah, so just regarding the EPS CAGR, is the right math to think about like 2026 high end and then growing 8% off that until 2030? Or should we think about the EPS CAGR kind of being based off the midpoint each year?

So midpoint each year is the way we guide And the 45Zs give us the potential to hit the upside, the top end of our market range. And as you know, those 45Zs extend through 2029. Got it.

Okay, that's helpful. And then just on the, you know, incremental load, maybe just like how much should we think about like the load is needed to trigger a new gas plant versus just more energy storage at this point? I mean, like when you look at the seven gigawatt pipeline, you know, how should we think about like what's needed for new base load versus just like incremental storage?

Yeah. So, you know, think of it this way. Any new data center load that we bring on after this 1.4 gigawatts will require additional resources. If we bring on something in the gigawatt range, it would require a combined cycle to support it. Anything lower than that would We could do a combination of, you know, either a smaller CCGT and some renewables and batteries, but we'll know all of that for certain once we sign the deal and incorporate it into next year's IRP. And that will really dictate the resource requirements and the resource mix.

Your next question comes from the line of Julian DeMolen Smith with Jefferies. Please go ahead.

Hey, congratulations again, Joy, and to the whole team here. Nicely done here, I've got to say, and nicely done on firming up this contract here, as you say. Now, with that said, and just to follow up on some of the last questions here, how do you think about the data center timing here? You talk about it being accretive to the plan. How do you think about the timeline for its ramp? I know that you already cautioned that it wasn't entirely clear-cut, but how do you think about it being accretive versus perhaps serial and an extension of the 6-8? We don't mean to nitpick too much here, but I think we heard your comments earlier, and I just wanted to come back and understand when that would really start to kick in and be accretive.

Yeah, you can think of it toward the tail end. Given just the lead times on some of the materials and the construction cycles, Julian, you could think of it toward the back end of our plan. So call it, you know, late 2029 into the early 2030s.

Got it. So that uptick would potentially be probably that first year really would be that 2030 timeframe. And then the question would be how sustained that elevated growth rate would be predicated on the success of the three gigawatts in late stage negotiations.

Yeah, and again, I'll repeat, we're going to take all of this and incorporate it into next year's IRP, and really that will dictate not only the timing but the right resource mix, which will then drive timing of construction, lead times for materials, and such.

Right, indeed. Your owned versus a contracted piece, et cetera, et cetera. Exactly. Excellent. Perfect. All right, well, I've taken enough. Thank you guys very much. I appreciate it. Good luck and congrats again.

Thanks, Julie. Your next question comes from the line of David Arcaro with Morgan Stanley. Please go ahead.

Oh, hi. Thanks so much. Good morning.

Good morning, David.

Hey. I was wondering, just on the advanced stage data center pipeline, is there any rough timing for when you'd expect the potential to finalize those deals? and bring them forward or advance other projects maybe from the earlier stage pipeline into the advanced stage pipeline? What's the pace of crystallization of some of the projects?

Yeah, thanks for the question. So we're in active negotiations, and we have been for some time. We are still settling on some key terms and ramp rates. I would envision that we would have at least an idea of the ramp and firming up some of the terms before we file next year's IRP. We're pulling that forward. That's the idea into the third quarter. So we would want to be able to understand the ramp, understand exactly when that ramp would lay out over a five-year plan and incorporate it into our modeling so we can put it into the IRP.

Okay, perfect. Yeah, that's helpful. And then you piqued my interest with the behind-the-meter project that you're working on for Vantage for a data center. I was just wondering if you might be able to elaborate on maybe how big of a project that might be, what kind of power generation technology you're using, any thoughts on maybe how returns stack up for that type of a project versus others in the Vantage pipeline. Yeah, curious about that overall opportunity.

Yeah, we're still in discussions with the data center provider. It's primary power, so it's behind the meter. You can think of that as more like CTs. And again, it's a little too early for us to give a lot of details around this deal. We haven't fully closed it yet, but it's a really good opportunity for the Advantage team, and it's right down the fairway if you look at our skill set as an enterprise. So This is just a really good example of the type of projects Vantage has in the pipeline that supports their income targets, and we'll look for additional opportunities like that should they become available. We'll keep you posted, though, as things develop.

Awesome. All right, sounds good. Thanks so much.

Your next question comes from the line of Bill Abicelli with UBS, so please go ahead.

Hey, good morning. Just a question around the rate case and the IRM. I guess, what is the potential upside for investment there? You know, should more supportive regulation and decisions come your way in terms of just the capital outlook on that mechanism?

Yeah. So, just to give clarity, the IRM, the investments are already in our plan. What we did hear back from the staff was strong support for the investment profile that we laid out in the case and the pace. So our intent, though, is to continue to grow the IRM in future cases. So in this case, we requested up to a billion dollars beginning in 2027. And we were really happy to hear the staff support even a pull forward. So they did pull out maybe $200 million of the pull-top maintenance and suggested that that should get incorporated into our existing IRM in 2026. So that would be incremental IRM spend that would show up next year should we get that final ruling in 2026 in February. So, again, it just showcases that we're aligned with the staff on the type of investments we need to make to improve reliability and the pace.

Okay, great. And then just taking a step back, I mean, we think about the broader growth rate through 2030. Just to be clear, when you guys say bias to the upper end, that's with the plan as it stands here today, or would that need to require some, you know, additional capital to push you to the upper end? Or just want to clarify that, or would that be then, you know, to the points made earlier, upside to, you know, to the plan overall?

Justin Capposian, Now that that six to eight through 2030 is our plan that we've laid out here today, and we say we have a bias to the upper end and each year again in that plan, due to the due to the 45 the tax credits and flexibility that they provide. Justin Capposian, A joint talk about the additional opportunities we have with additional data centers that would drive some additional upside to that plan.

Okay, so then when we talk about through 2030, which is post the tax credits, when you talk about the bias of the upper end extending out that far, that reflects just the capital plan as it stands today?

Yeah, we see when we get to 2030, because of the 45Zs also, you have flexibility year to year. So we think there's opportunity in 2030 to hit the upper end that year, too, of the six-day range.

Okay, all right, great. Thank you.

your next question comes from the line of michael sullivan with wolf research please go ahead hey good morning morning hey hey hey guys uh sorry just wanted to pick right up on that last question dave so in 2030 when the 45 z's go away what is it that pushes you to the high end or is there like some way you can continue to book those a year beyond the expiration or just, just a little more color on that would be helpful.

Yeah. Well, what we see with these 45 Z's is flexibility, right? So what we've been able to, as we've done this year is find ways to pull forward some expenses to help help future years. And we just see that favorability from 2029 helping us in 2030 as well, to be able to be in a good position to reach the higher end when we get out there too.

Okay, that's really helpful. And then another one for you, Dave. I think in the past you may have all pointed to more of like a 15 to 16% FFO to debt range, and it looks like now just 15%. Any color on what's going on there?

Well, I'll just say, Michael, we have got great growth opportunity in our utility as we're doing this work that Joy described for reliability and cleaner generation, also the data center. we're comfortable targeting this 15 range continues to give us the right cushion over the uh over the thresholds that we think and you know it puts us in a really good place remain committed to having a good balance sheet and we're we're working with the rating agencies to ensure they fully understand our financing plan um really our strong cash flows too and they'll be comfortable with it going forward okay and one last quick one just the um

The $2.5 billion for CCGT investment, I think you're building a 1.5 gigawatt plant. Is that the full amount, or are you not capturing the full investment in the five-year, and the plant itself could cost a little more than that? Because that just seemed a little on the lower end, I would have thought, of what a combined cycle would cost.

Yeah, it trails into 31, so beyond the five-year.

Okay. Okay. Thank you both very much. Thanks, Mike.

Your next question comes from the line of Andrew Weasel with Scotiabank. Please go ahead.

Hey, good morning, everyone.

Good morning.

Hi, Andrew. Hi. Dave, a question for you first. You mentioned that at GAS you're unwinding some cost-cutting efforts from the past few years. I know that as a company, you're masterful about being nimble with O&M expenses, but I thought that was typically more short-term, like within a year, maybe two. So I'm a little surprised to hear you talk about it over a multi-year period. Can you discuss some examples of what might be included in there, what type of actions you're referring to? And then as we look to 26 and beyond, how should we think about the O&M outlook for the gas business?

Yeah, we've essentially... Some of the backlogs, maintenance backlogs, we allowed those to rise, and we're unwinding a lot of that this year. So that's just an example of some of the things that we typically do in the gas company. And we were ahead of plan before we saw warmer weather, so we had some opportunities to relax our maintenance efforts. And this is non-emergent maintenance backlogs. And this year, we're just getting back on track. We're getting back to our normal run rate for maintenance and other expenses.

And Andrew, I'll say, like, on our ability to be nimble, like, we had a couple years of warmer weather at gas. And so, you know, that did extend over a couple years. But it still shows that we're able to balance things across our business to make sure we do everything to hit the numbers.

Okay, great. And then as far as the outlook?

The outlook for gas.

Can we think about O&M? Yeah, the outlook for O&M at gas going forward?

Yeah, the O&M for gas, I think this is a normal runway that we would typically see. And then, as usual, we build in some flexibility where we can lean if we need to or invest should we see colder than normal temperatures.

Okay, got it. Thank you. And then, Julie, in your prepared remarks, I want to ask about affordability a bit. I think you said the 1.4 gigawatts of new data center load should bring meaningful affordability benefits to the existing customers. But then you also talked about protecting them. So I'm just wondering, can you get more specific? Are you expecting the new data centers and this specific deal to be neutral to residential customer rates or monthly bills or deflationary? And how will that impact flow through? Will that go through rate cases or through the industrial tariff? How's that going to work for existing customers?

Yeah, this is great for existing customers because we don't have to build anything substantial to support the load. We're using our excess capacity to support the load and building batteries on top of it just for peak shaving purposes. And the customers get that full benefit. So it will show up in the form of a lower ask over our next rate case cycle. So customers will get that flow through in that form. In terms of the protections, the contract terms protect our customers from stranded assets or rate shock over a period of time when we're serving the customers, the data center customers, that is.

All right. Very good. Thank you very much, and congrats.

Thank you, Sandra.

Your next question comes from the line of Anthony Crowdell with Mizuho. Please go ahead.

Hey, good morning, team. Hope all is well. I just wanted to follow up two quick cleanups. One to Mike's question earlier on the FFO to debt, Dave. As Vantage becomes a smaller and smaller portion of the company's earnings mix, any conversation with the agencies of an improved or a lower downgrade threshold?

We are in constant communication with the rating agencies. I think right now, and because we have a lot of really utility-like projects advantage, I don't know if that will lead to lower thresholds, but we will continue those conversations because we will be moving more into that going forward as well. And the current threshold is 14% or 15%? It's down around 14%. The rating agency depends on the way they measure it also relative to how we do, but more in the 13% to 14%.

Great. And then one of the earlier questions I think Bill was asking on the IRM mechanism, you highlighted I think staff is $1.2 billion. I guess just is the cadence of spend, if you could just talk about that, and then also the company previously or historically would file maybe an electric case every year. 12 to 24 months, does that stretch out the filings, the frequency of the filings?

Yeah. Um, so the way the IRM is, is a billion dollars. It starts in 2027. We have an existing IRA IRM, but it starts to ramp up in our filing in 2027 and grows to a billion dollars over three years. And, uh, the way that we've laid this out, um, we would start to see that investment grow and make adjustments along the way based on performance. So in our next filing, we will look to update it and increase it even further. You asked about will that keep us out of rate cases. Where we have it right now, it will give us maybe six to eight months worth of, I think, benefit that we could push out a rate case for that period of time. As it continues to grow, that time will lengthen.

Great. Thanks again, and Joy, such an improvement versus Jerry.

Great move. Thanks, Anthony.

Thanks, Anthony. Your next question comes from the line of Paul Freeman. Will Lautenberg, please go ahead.

Thank you very much, I guess, my first question is the junior subordinated data you talk about is that instead of or in addition to the to the to the planned equity annual issuance of equity.

yeah we um we do expect to have some junior sub that comes within within our plan. We're going to look at that strategically, but that would be additional to the equity that is laid out. What we've laid out is what we would need to do for true equity issuances of $500 to $600 million.

Great. And then on the CCGT, what is the cost per KW that we should assume for the CCGT?

Well, we're seeing ranges. So right now it's roughly $2,500, and we're still updating our estimates. We'll know for certain once we get the finalization of our RFPs and see, you know, what is coming out. We've got the IRPs for our power island, but there's still some additional work. But that's our initial estimate at this point.

Great. And then turbine availability, if you get the three gigawatts that you're in advanced stage negotiation, do you see – you know, what timeframe do you see sort of being able to get turbines?

Yeah, well, we're actually in the queue for our turbines that we want to bring on to replace Monroe only. And that CCGT we have in the plan, it only supports the retirement of Monroe. It has nothing to do with data centers. If we want to bring on another to support data centers, we're still seeing a three- to four-year timeline for at least a gigawatt and above. There is some flexibility we're seeing for smaller turbines. It just depends on, you know, how big of a data center load we're trying to serve and when the ramp kind of gets to the top end. So we'll flesh all of this out in next year's IRP and, again, pick the right resource mix to support the loads.

So I guess just theoretically, if some of the three gigawatts were to be finalized, if their need were sort of before that three to four-year timeline, you would serve that load potentially through purchase power, or how would that work?

Yeah. The way that we're going to address these contracts is really get a sense of how quickly they want to ramp. and then use the IRP modeling to tell us what is the optimal resource mix to support that load. It could be a combination of renewables and battery storage, similar to what we're doing with this, the deal that we have on the table, or it could require a CCGT. Still too early to say. All of that will get fleshed out as we finalize the negotiations and incorporate it into the IRP next year.

Great. And then last question for me, you're looking at potentially higher trading contributions in 25. Can you give us a sense of how much and will next year's trading contribution be sort of back at the 50 to 60 level that it was this year?

You're right, Paul. Trading is having a really good year. We're seeing these strong margins. We talked about both gas and physical power portfolio, you know, again, structured and hedged. Right now, Our year-to-date is above the range, and that's given us some flexibility across our business. We don't plan for earnings to continue at that pace. We put in the 50 to 60, as you mentioned. However, because some of these contracts are longer-term, we do see some favorability that could come into 26, but we don't forecast that long-term. We forecast around the 50 to 60 still.

Great. Thank you so much. Thanks, Paul.

Thanks, Paul. Your next question comes from the line of Angie Strzoznik with Seaport. Please go ahead.

Good morning. So lots of questions ahead of me, but can you give me a sense, you know, the one and a half gigs or the current data center contract that you just finalized, 1.4, and then the additional contracts in the works? I mean, how do they compare versus the load that you currently serve? Yeah, like percentage-wise, how big of an impact is it?

Yeah, so the 1.4 increases our load by 25%. So that should give you a sense of what an additional gigawatt could equate to if we were able to bring it on.

Yeah, I mean, yeah, that puts it in perspective. Now, on Vantage, I understand that you're shifting investments towards... basically a higher multiple business, which makes sense. But it's kind of surprising to see that there's less of growth opportunities for Vantage in this day and age where you have this seemingly an explosion of behind the meter generation like Cogen seems to be such a hot investment right now. You know, if only because it's behind the meter, if only because it's time to power. So again, you did mention some commodity price pressures, but I'm, you know, a little bit surprised to see this lower growth key curve for that business.

Yeah, Angie, we're going to continue to work the BD pipeline there. And, you know, this first deal that we're getting, at least trying to get under our belt, would inform, you know, if this is a vertical that we can pursue further. And again, this is outside the state of Michigan. We're hearing more and more that this behind the meter option is something that data center providers want to pursue. And so to your point, we're going to keep working it and ensure that we've got the execution capability. We've settled on a design we think that works and that gives the redundancy. So we think that could position us to be really attractive to data centers that are looking to pursue this type of solution.

Okay. And Dave, could you comment on growth expectations for your dividend in this new higher CapEx environment?

Yeah, Angie, we're going to continue to revisit the dividend growth. We said in our prepared remarks we're going to grow them with our operating EPS. And right now we're in a payout ratio that's right in the midpoint of our peers. But we're going to continue to look at that and make sure that it supports both growth and what our investors prefer here.

Very good. Congrats.

Thank you.

Thank you.

Your last question comes from the line of Travis Miller with Morningstar. Please go ahead.

Good morning, everyone. Thank you. Good morning. I just want to confirm the cash flow and earnings mix here over the next couple years. So you're very correct. The ramp comes for this data center. The ramp comes next year. And then there's really no incremental capital that you would fund because they're funding the storage, right? So cash flow and earnings should be pretty close. at least over the next one to two years as this data center contract ramps up? Is that correct?

Well, we're investing the storage to fund the storage assets. And then we'll be getting the cash flows from the ramp, which does ramp up really quick. But we will be investing in those storage assets. And that's why one of the reasons why we're pulling some of our capital forward and need some of this additional equity. Okay, okay.

No, it'd be over a short period of time, though, right? Yeah, short periods, next two years. Okay. And what size is the storage investment? Not dollars, but how many gigawatts or megawatts?

It's a gigawatt of storage, and then we're going to use tolling agreements. So in accordance with our IRP settlements, we are going to build two-thirds of the requirement, and then we're going to use tolling agreements for the other third, which are We'll get the FCM on the tolling agreement.

Okay. Okay. Very good. That's all I have. Thanks so much. Thank you.

All right. Well, thank you, everyone... There are no questions at this... Go ahead. Thank you, everyone, for joining us today. I'll just close out by saying DTE continues to have a really strong year in 2025, and And we are well positioned for 2026. And I am just really excited about our long-term plan and the opportunities ahead. And I look forward to seeing many of you at EEI in just over a couple weeks. So thank you all for joining us today. Have a great morning. Stay safe and be healthy.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. And you may now disconnect. Everyone, have a great day.